Bullion gold: a safe investment in times of crisis
The subprime crisis in 2008 eroded the secure investment image of the real estate sector. In fact, the value of bullion gold rose by 300% between 2002 and 2017 when the real estate prices in Paris increased by 150%. If we take into account the proportion of rents received, it almost reaches 200%.
One of the best performances of the gold price was recorded during the oil shocks. Driven by the end of the dollar’s convertibility into gold, its price rose by 1600% in the United States from 1971 to 1980, while real estate rose by only 70% over the same period.
In addition, gold has a higher liquidity than real estate; its resale is almost immediate, while real estate is subject to longer resale periods. It has a safe haven status because its value is not influenced by stock market crashes.
Emerging countries have understood that. In recent years, investments by China and Russia to increase their gold reserves have reached unprecedented levels. In less than 5 years, Russia has acquired more than 900 tons of gold, including 274 tons in 2018 alone.
Real estate: a riskier investment than it seems
Real estate is a tangible asset just like gold, which can ensure its reliability in periods of relative economic stability. It allows you to receive regular incomes when you rent it, unlike gold, which has an insurance status.
However, a good real estate investment depends on a prosperous housing market. It can widely vary depending on location and demand. It is a good with a low profitability.
Real estate requires a lot of time and money for its management and maintenance to prevent it from depreciating. It is also highly exposed to human risk (squatting, unpaid rents, damage, etc.) and natural disasters. When financing by bank loan, this can quickly prove problematic for the conservation of the property and for the investor’s personal finances.
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